Britain could face a second recession, how will you cope?
Filed under: Hot Searches, Lifestyles, Money, February 2010
Many economists continue to warn that we could be heading for a second recession. We may have just emerged from one of the worst downturns ever but conditions are right for a scenario known as 'W-shaped' or 'double dip' recession. The economy would recover, briefly, only to dip back down again. If this happens how well placed will you be to weather the storm?
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It's time to batten down the hatches but just how can you defend yourself against difficult economic times? Here's some advice:
The best way to make use of your cash if you have debts is to pay them off. More and more of us are realising, with interest rates low, that paying off credit cards and loans will be of greater benefit than saving. These debts can have very high rates of interest, far higher than your savings, so paying these off first makes sense. It is also prudent in the face of any future downturn not to be lumbered with debt. Even if you can't clear all your credit cards look around for the best transfer deals, you could still trim those outgoings.
It's a good idea not to commit to any further debt. Avoid large monthly subscriptions and hire purchase agreements. Gym memberships, TV packages and large new purchases will eat into your funds and could cause you difficulties in tougher times. Once clear of debt you should look to build up a cash buffer.
Your savings aren't as safe as they use to be. Even the top banks can get into trouble, so where you put your money matters. A good place to consider investing in is National Savings & Investments - a government backed savings bank that allows you to save up to £15,000 tax free and NSI also guarantees your savings to better the rate of inflation. Ideally, you should aim to have three months' salary to fall back on. Not everyone can save a small fortune but if you do have cash to play with then don't put too much in one institution, certainly no more than £50,000.
Your biggest monthly commitment is probably your mortgage. Reducing your mortgage will help you if a recession bites. This may also help you when you to get a better rate of interest when you come to remortgage. The interest you pay means you are best using your capital to reduce that debt.
Consider payment protection insurance. Some of these can be very expensive when bought with the loan so try other, stand alone deals; these are usually much more competitive. Should redundancy occur then you can be reassured your repayments will be covered. Always check the small print.
If you are self employed make sure you put enough money away to pay your tax. You should be prepared to save around a third of your income. Alternatively, buy tax certificates, these can only be used to pay your tax bill and will stop you dipping into the funds you've set aside.
Do you have any recession-proofing tips and hints? Share them here by leaving a comment.
Reader Comments (Page 1 of 1)
justen Karlsson said 4:34AM on 2-27-2010
I hope it happens before the Election because its this Labour government that is creating the double dip by spending and not saving, its ok saying that we need to help the people they are not, they are just binding the people. There has been 3 Stealth Taxes brought in since Christmas, the only way to get this Country back on its feet is to get it working again, but the holiday for VAT, Housing Stamp Duty, has put paid to that. The biggest Industry is Construction and this Government have let it disintergrate. Take Royal Bank of Scotland making 3.5 Billion loss, now add this loss to the 2.5 billion in their bankers bonuses and they have a loss the same as Lloyd's/TSB. If people have to put up with a drop in wages and wage freezes then the Bankers should suffer the same. This Government is weak, and just potters about running from one catastrophe to another. We need strong Government that will pay back our debts and get the country back in the Black instead of one that spend spend spend, it did Viv Nicholl's no good at all-Remember.
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k mayhew said 7:37AM on 2-27-2010
Its all the goverments and banks fault NO it is not ,it is people living above there means people did NOT have to take the money the banks offerd them,they chose to ,had the goverment not put money into the banks the system would have crashed. this all started in the Thatcher years and we are still paying for it sad to say people FORGET.
Grant McCahon said 6:07AM on 2-27-2010
We must think of the British economy as we would think of our household, bigger, but in need of the same ' economies '. Look at your debt, cut back on unnecessary outgoungs and keep an eye on your energy consumption. As the government fiddles while our economy burns down, we should look to our own households and batten down the hatches. Dump the morning coffee routine and the croissant, turn down the heating and walk a little more than drive, even in awful British weather.Take a look at how you shop. Bad habits we get into can be turned around. Know how much things cost so supermarkets don't seduce you into false " specials". If you're made redundant, don't dump your gym membership but downgrade it until things sort out. You'l need to stay healthy and mentally alert for your next job interview. If you get a redundancy package put some of it toward your mortgage to keep a roof over your head. In this changing world, we too have to change. Look at what you are capable of and see if you can turn that into a money spinning enterprise. Have an emergency store cupboard for non-perishable foods to stock up when they are genuinely reduced in price. Be determined to survive this adversity, and try to laugh in the face of all that is thrown at you. It's a tough time, remember Darwin's theory that only the strong survive, be one of them and smile through.
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Jayne said 6:57AM on 2-27-2010
Fantastic reading because it's true ! I like shopping in Asdas and buying there pound deals like meat as i bulk the meat out with veg + onions and 2 packets of casarole steak ( make sure you cut up small )this makes 3 pie's i make my own pastry with cheap tesco's flour and value butter. For gravy cheap stock cubes and flour and water with small amount of gravy.It's like going back to post war but i tell you home cooking is better and also you can freeze the pie uncooked and ready for the oven when needed. P.s I'm all out for saving money !
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